A change order is a formal document used to modify the original terms of a contract or project plan. These changes can include adjustments to scope, budget, or timelines. They are common in industries like construction, software development, and event planning.
For example, in construction, a client might request a new feature after work begins, like adding a room or upgrading materials. This change requires an adjustment to the project, and a change order records the new terms.
The purpose of a change order is to keep things clear. It ensures that all parties involved—whether it’s contractors, clients, or stakeholders—are on the same page about what’s changing and what the new expectations are.
When Are Change Orders Needed?
Change orders usually happen when something unexpected comes up or when requirements evolve. Here are some common situations:
- Design Modifications: A client decides they want something different from the original design, like changing the layout of a building.
- Budget Adjustments: The project’s costs go up due to price changes in materials or labor.
- Scope Changes: New features or tasks are added to the original plan, requiring extra time or resources.
Whether it’s a small tweak or a major adjustment, having a process to handle these changes keeps projects on track.
Types of Change Orders
There are several types of change orders, each serving a specific purpose.
Additive Change Orders
These add something new to the project. For example, a homeowner might ask a contractor to install a deck that wasn’t in the original plan.
Deductive Change Orders
These remove something from the project. If a client wants to cut costs, they might decide to use less expensive materials or skip a feature entirely.
Time-Based Change Orders
Sometimes, a project needs more time to meet new requirements. A time-based change order adjusts deadlines without necessarily changing the budget or scope.
Combination Change Orders
These involve multiple changes, like adding new tasks while also extending the project’s timeline.
Key Components of a Change Order
A good change order includes specific details to avoid misunderstandings.
Description of Changes
This explains what’s being modified in simple terms. For example: “Replace standard roofing with solar panels.”
Cost Impact
It breaks down the costs associated with the change, whether it’s an additional expense or a cost reduction.
Schedule Adjustments
Any changes to deadlines or project timelines should be outlined here.
Authorization and Approvals
A change order is incomplete without the signatures of all involved parties. This ensures everyone agrees to the new terms.
Benefits of Change Orders
Clear Communication
Change orders eliminate guesswork. Everyone knows exactly what’s changing and what’s expected.
Better Project Tracking
Keeping a record of changes helps teams stay organized and monitor the project’s progress.
Reduced Disputes
By formalizing changes, you reduce the chances of disagreements between contractors, clients, and other stakeholders.
Challenges of Change Orders and How to Manage Them
Delays in Approval
Getting everyone to sign off on a change order can take time, which may delay the project. To avoid this, establish a clear approval process early on.
Budget Overruns
Changes often come with extra costs. It’s important to track expenses closely and communicate any cost impacts to clients or stakeholders immediately.
Scope Creep
Too many changes can derail a project. Limit change orders to necessary adjustments and ensure all changes align with the project’s goals.
Process for Handling a Change Order
Identify the Need for a Change
The first step is recognizing when a change is needed. This could come from a client request or an issue that arises during the project.
Document the Change
Write down the details of the change, including what’s being modified, how it affects the budget and timeline, and why it’s necessary.
Review and Approve
Get everyone involved to review and sign off on the change order. Use digital tools or templates to speed up this step.
Implement the Change
Update the project plan and communicate the changes to the team. Make sure everyone understands their roles and responsibilities under the new terms.
Tools and Templates for Managing Change Orders
Using the right tools can make managing change orders easier.
- Templates: These ensure all necessary details are included in your change orders. You can find free templates online or create one tailored to your needs.
- Project Management Software: Tools like Asana, Monday.com, or MS Project help you track changes, timelines, and budgets in one place.
Examples of Change Orders
- Construction: A client requests a different paint color for a building after the project starts.
- Software Development: A company adds a new feature to a mobile app, requiring changes to the original scope.
- Event Planning: A client decides to add a VIP section to an event, increasing the budget and setup time.
Tips for Managing Change Orders
- Act quickly when changes are needed. Delays can lead to confusion or missed deadlines.
- Keep communication open with all stakeholders. Regular updates build trust.
- Document everything. A well-documented change order protects everyone involved.
- Use technology to track changes and approvals. Digital tools save time and prevent errors.
Final Thoughts
Change orders might seem like a hassle, but they’re essential for keeping projects organized and on track. When managed well, they help maintain clear communication and ensure everyone stays aligned on project goals.
FAQs
What is a change order?
A change order is a document used to modify a project’s original scope, timeline, or budget.
Why are change orders important?
They formalize changes, prevent confusion, and keep everyone on the same page.
What causes a change order?
Common causes include client requests, budget adjustments, and unexpected project challenges.
Can change orders delay a project?
Yes, but timely approvals and clear processes can minimize delays.
What tools can help manage change orders?
CRMs, project management software, and templates can make the process smoother.
